The FCA has published Policy Statement 15/2: Recovery and Resolution Directive: Feedback on CP14/15 and final rules (PS15/2).
In PS15/2 the FCA summarises the feedback it received on its August 2014 consultation paper on implementing the Bank Recovery and Resolution Directive (BRRD), gives its responses and sets the final rules. The FCA’s earlier consultation did not extend to the substantive resolution aspects of the BRRD that fall to the resolution authority. Instead the FCA consulted only on the draft Handbook rules and guidance that are necessary for those firms that the FCA prudentially regulate and fall within the scope of the BRRD. The consultation also contained a discussion chapter which sought stakeholder views to help inform the FCA on its future approach to three specific issues in the BRRD:
- which metric or metrics should be used as early intervention triggers;
- whether or not firms should be required to maintain detailed records of financial contracts as part of their recovery plans; and
- how a minimum requirement for own funds and eligible liabilities should be set by the Bank of England, as the resolution authority, for each firm.
The final rules set out in PS15/2 do not differ significantly from the draft rules on which the FCA consulted. The final rules set out in PS15/2 apply to:
- investment firms that the FCA prudentially regulates and that meet the definition in the FCA Handbook of an IFPRU 730k firm; and
- group entities in a group that contains a 730k investment firm or credit institution.
The final rules will enter into force on 19 January 2015, except IFPRU 11.6 on the contractual recognition of bail-in which will come into force on 1 January 2016. The reporting of recovery plans will be phased in from the end of June 2015.
All IFPRU 730k investment firms and group entities in a group that contains a 730k investment firm or credit institution should review the changes to the FCA Handbook. Such firms should establish how the new rules will affect their business and the changes that need to be made.
How the FCA intends to deal with the three issues set out in the discussion chapter of the earlier consultation paper are also covered in PS15/2.